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Korea's Biggest Money Manager Mirae Asset Buys Indonesia, Kazakhstan Bonds
Mirae Asset Global Investments Co., South Korea’s biggest asset manager, is buying high-grade bonds in emerging Asia to gain from improving economies while avoiding riskier securities.
“We’re investing in quasi-sovereign bonds in countries such as Indonesia, the Philippines and Kazakhstan,” Kim Sung Jin, who oversees about 10.5 trillion won ($8.8 billion) as Mirae’s fixed-income chief investment officer, said in an interview in his Seoul office yesterday. “Investors will keep snapping up emerging-market bonds for an extended period of time on better economy and policy capabilities.” Mirae likes investment-grade corporate and bank bonds in the region, he said.
Developing-nation bond funds attracted $32.3 billion this year through Aug. 18, triple the previous full-year record set in 2005, according to research firm EPFR Global. Asian local currency bonds have returned 8.14 percent this year, according to HSBC Holdings Plc indexes. Global sovereign bonds returned 4.4 percent in the same period, Bank of America Merrill Lynch indexes show.
The International Monetary Fund forecast last month that developing economies in Asia will expand 9.2 percent in 2010, compared with 2.6 percent growth for the advanced nations.
Bonds sold by banks in developed countries that received public funds are also a buy, as spreads are wider than those on similar-rated corporate notes, according to Kim. Spreads on U.S. corporate bonds rated A average 173 basis points, compared with 259 basis points for banks rated the same, Merrill indexes show.
Kazakhstan’s government yesterday raised its growth estimate for this year to 5 percent from 4 percent. Philippine growth reached the fastest in three years last quarter.
South Korean Bargains
In South Korea, Kim favors longer-term bonds on higher absolute yields, possible local currency appreciation, reduced supply and China’s currency reserve diversification.
The yield on South Korea’s 10-year government bonds was 4.54 percent, according Korea Financial Investment Association data. That compares with 2.53 percent for the U.S. 10-year notes.
China more than doubled South Korean debt holdings to 3.99 trillion won in the first half as policy makers shifted part of the world’s largest reserves out of dollars, according to data from the Financial Supervisory Service.
South Korean bonds handed investors a 6.5 percent return this year, delivering a profit every month, according to an index compiled by HSBC Holdings Plc. That’s the best winning streak since March 2007.
Kim also likes inflation-linked bonds as “reactive” rather than “proactive” monetary policy across the world could spur inflation further out.
Inflation erodes the value of bonds’ fixed returns. Inflation-linked bond yields are pegged to the rate of price increases, and investment-grade bonds are rated BBB- and above by Standard & Poor’s.
To contact the reporter on this story: Jungmin Hong in Seoul at jhong47@bloomberg.net.
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